Renegotiation over Fujian's LNG contract may fail

The government's efforts to renegotiate the LNG sales contract with Chinese province Fujian may fail because the ceiling price proposed by CNOOC as the representative of the Fujian provincial administration is still far below the expectation, Kardaya Warnika, the chief of the government's regulatory body for oil and gas upstream industry BP Migas has said.

"The ceiling price proposed by CNOOC is still too low," he was quoted as saying by Bisnis Indonesia.

The Fujian administration signed in 2002 a 20-year contract to buy 2.6 million tons of Liquefied Natural Gas (LNG) from Tangguh LNG plant. The ceiling price of the crude oil which will be used as the reference to determine the LNG price is set at US$25 per barrel. Based on this ceiling price, the LNG price will be only about US$2.4 per Million Metric British Thermal Unit(MMBTU) free on board.

Kardaya said that the selling price of the LNG to be sold to Fujian would be too low, because based on the current crude price of US$65 per barrel, the LNG price in the international market had reached about US$8 per MMBTU.

He, however, refused to unveil the ideal ceiling price being proposed by the government. "I will not disclose the proposed ceiling price because it could affect the negotiation," he added.

"We will go China next week to continue the renegotiation process. We hope they will understand the situation," he added. (*)